As consumers, we all hear about New Product Development that goes into the Research and Development process. Although, many consumers and even business professionals don’t know the exact steps involved. I will cover New Product Development in this article.
The New Product Development process is explained as a series of steps to develop new products. The first two series of steps are IDEA generation and Screening. IDEA generation makes up the research involved with developing patents and intellectual property. This research is divided into primary and secondary. Primary research involves tasks such as focus groups and secondary research involves publications and competition. Screening is then the second step which involves the review of such proposed new products by a committee of sorts including various departments like Finance and Marketing. The new products must meet the following criteria: 1. it must satisfy customer’s needs, 2. play to firm’s key competitive advantage, 3. provide marketing synergy, 4. provide production synergy, and 5. provide financial synergy. In other words for criteria 3-5, products must be synergistic with the firm’s existing products.
The next two series of steps are Economic Analysis and Development. Economic Analysis involves the valuation of future products for developing the new product in mass volume. The Finance department must provide sales forecasts to determine the weighted moving average, experiential smoothing, etc. and provide cost estimates like payback period, capital budgeting, time value of money, etc. Development is then the next step which involves technical and marketing development. Technical development includes the engineering feasibility of the new product’s design ability, produce ability, and operation ability. The marketing development includes the 4 P’s of the marketing mix (product, price, placement, and promotion), and the product design.
The last two series of steps are Test Marketing and Commercialization. Test Marketing involves formal experimentation of the newly developed product. There must be a good site picked to test market the new product within a sample population of diversity. The major advantage of Test Marketing allows flexibility to change the product but the disadvantage is the cost required. Limitations include sampling error, the limited time devotion, and vulnerability to loss of secrecy. Commercialization is then the last step of the New Product Development process which involves the theory of Diffusion of Innovation chart below. This chart explains the role new products play when commercialized for the first time. Typically, the product will be adopted by innovators, early adopters, the early and late majority, and the laggards. For example, the tech YouTube personalities who get their hands on new tech before the products released are known as the innovators or early adopters. Towards technology, I myself am an early adopter to early majority.
As the 2014 year comes to a close, the marketing series however will not. I expected I was going to be able to wrap up the year with this marketing series although I’m at least a couple articles behind in this series. So stay tuned for more Marketing articles early into 2015.
